This will be driven by a growing number of individuals and corporates opting for Takaful insurance cover, improving regulatory mechanism and increasing government support, they said.

"Across the board in the GCC there is growing appetite for Takaful and the industry is very much in growth mode. Appetite continues to grow from both individuals and corporate institutions, who are looking to purchase policies on behalf of their employees," David Hunt, Head of Insurance, HSBC Middle East, told Emirates Business.

"We are fairly positive about the outlook of Takaful insurance in the GCC in 2010. Given the low insurance penetration across the region, we think the industry would continue to grow faster than non-oil GDP and conventional insurance.

The industry is expected to grow at about 16 per cent per annum between 2009 and 2012, said Tommy Trask, Executive Director and Head of Industry Research services, Alpen Capital, Dubai.

Market analysts believe government support across the region is a major factor pushing the Takaful insurance industry.

"The religious factor is important. Apart from that, governments are promoting the use of insurance across the Gulf. Saudi Arabia, for instance, completely rebuilt its insurance sector around the Takaful model," said Kevin Willis, credit analyst, S&P Ratings Services, from London.

"They have introduced compulsory motor and health insurance. So, there is a natural growth momentum. Similar approaches have been taken in other Gulf countries. Abu Dhabi, for instance, has introduced compulsory medical insurance for its workforce."

However, asset price volatility remains a concern for Takaful players in the region. Trask said: "These companies are highly exposed to the local equity and real estate markets, where we've seen quite a lot of volatility.

"These firms would continue to see volatility until they adopt more conservative investment strategies and start allocating more of their assets into sukuks, for example," he said.

Willis said: "The underlying profitability that we're seeing in the Takaful sector is not as great as that which we're seeing in the conventional insurance sector.

"But there's a growth appetite in the Takaful sector in the region".

Asked whether Takaful is a safe option for buyers in the current challenging times, Hunt said: "Risk profiles tend to be similar to those of conventional insurance and the way Takaful operations underwrite the risk is also very similar. The difference lies in the investment portfolios of Takaful companies, which must comply with the investment restrictions relating to forbidden sectors or instruments under Shariah law."

He said in the GCC a lack of regulations has historically impeded progress, but as competition continues to increase, regulators are developing supervisory frameworks. "The Saudi Arabian market is one good example where regulators have greatly developed the framework in recent years. The market has gone from having more than 100 unregistered companies to a handful of separately-listed Saudi companies," Hunt said.

Globally, Takaful continues to display rapid growth in new and existing markets – with the largest markets including Saudi Arabia and Malaysia.

On whether there are any risks involved, Trask said: "There're two risks. The first is that Takaful industry is characterised by a small number of very big players and very large number of small players or start-ups in the region.

"Additionally, the market is very fragmented and there's a fear that some of the smaller players would be marginalised," he said.

Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.